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What is a CVA?

Before we look at the CVA process, including how it works and what it entails, it’s important to understand what a CVA is.

A Company Voluntary Arrangement (CVA) is a legal agreement between a company and its creditors to repay some or all of its debts over a set period of time.

A Company Voluntary Arrangement can be a useful tool for companies struggling with financial difficulties, as it allows them to continue trading while also addressing their debt issues.

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What is the CVA Process?

1. Consultation with Insolvency Practitioner

The first step in the CVA process is for the company to consult with an insolvency practitioner (IP).

The IP will assess the company’s financial situation and advise on whether a Company Voluntary Arrangement is the best option.

The IP will also work with the company to prepare a proposal for the CVA. This will outline the repayment plan for creditors.

2. Proposal Presentation

The next step in the CVA process is the proposal.

The CVA proposal is a document that outlines the terms of the arrangement, including the proposed repayment schedule and the duration of the CVA.

The company’s creditors must approve the proposal, and the IP will work with the company to ensure that it is fair and realistic.

3. Creditors Meeting

Once the proposal has been prepared, the company will hold a meeting with its creditors to present the CVA proposal.

Creditors will then have the opportunity to vote on whether to accept the proposal.

If the majority of creditors vote in favour of the proposal, the CVA will be approved.

4. Implementation of CVA

Once these meetings have been completed, the insolvency practitioner must submit a written report to the court and all creditors.

This should completed within four days of the vote. It includes the outcome, who was there, and how each person voted.

At this point charges and interest on the company’s debts are frozen and creditors are stopped from taking any legal action against the company.

It’s agreed on the level of repayments the debtor company will commit to. This can often be a percentage, so as the company makes more profits the payments can increase accordingly.

5. Completion of a CVA

Once all payments have been made and the CVA has been completed, the company’s debts are considered fully settled.

The company should be able to continue trading without the burden of its previous debt issues and the CVA process comes to a close.

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When does a business need a CVA?

Here are some situations where a company may need a CVA:

  • The company is struggling to pay its debts and is at risk of insolvency.
  • It has been served with a winding-up petition or a statutory demand.
  • The company is experiencing financial difficulties due to external factors such as changes in market conditions, economic downturns, or loss of a major customer.
  • The business has a viable future but needs breathing space to restructure and repay debts.

However, a CVA is not suitable for all businesses and should only be considered after seeking professional advice from a licensed insolvency practitioner.

CVA Process Conclusion

A Company Voluntary Arrangement can be an effective way for companies to address their financial difficulties and continue trading.

By following the CVA process, companies can work with their creditors to come up with a fair and realistic repayment plan.

This should ultimately allow them to move forward and focus on their future success.

If your business is facing troubled times and feel a CVA may be the right solution for your business then contact us for confidential help and advice.

Call our expert team on 0800 088 2142 or fill in the form to book an appointment.

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    Business Helpline Accreditations
    Andy Slinger

    Andy is Head of Marketing for Business Helpline with a wealth of experience Marketing in the financial sector. He has a passion for helping business owners struggling with debts.